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CSA publishes proposed amendments to public crypto asset fund rules

Jan 19, 2024

On January 19, 2023, the Canadian Securities Administrators (CSA) published Notice and Request for Comment on Proposed Amendments to National Instrument 81-102 Investment Funds Pertaining to Crypto Assets. The Notice sets out a series of proposed amendments and changes to reporting issuer investment funds that seek to invest directly or indirectly in crypto assets (public crypto asset funds).

The primary objectives of the proposals are to provide greater regulatory clarity on permitted crypto asset investment activities, to prohibit the use of crypto assets in securities lending and (reverse) repurchase transactions and to confirm custodial expectations.

The most significant updates to the existing public crypto asset fund practices include:

  • explicit limitations on Non-Fungible Tokens ;
  • mandates for investing solely in crypto assets (or derivatives with crypto asset underliers) that are traded on recognized exchanges while continuing to allow purchases on crypto asset trading platforms;
  • requiring crypto custodians to obtain, and deliver to public crypto asset funds, SOC 2 Type 2-like reports

The Notice represents the second phase of the CSA’s ongoing effort to establish a comprehensive regulatory framework for public crypto asset funds in Canada. Following their initial guidance document (CSA Staff Notice 81-336 Guidance on Crypto Asset Investment Funds), these amendments aim to further clarify existing securities regulations and refine expectations for how such funds operate under National Instrument 81-102 Investment Funds.

Access the notice on Ontario Securities Commission’s website.

Leaf - sustainability (green) Image

IFRS Foundation and GRI publish summary of interoperability considerations for GHG emissions

Jan 18, 2024

On January 18, 2024, the Global Reporting Initiative (GRI) and the IFRS Foundation jointly published an analysis and mapping document titled ‘Interoperability considerations for GHG emissions when applying GRI Standards and ISSB Standards’.

This document illustrates the areas of interoperability between GRI 305: Emissions 2016 (GRI 305) and IFRS S2 Climate-related Disclosures (IFRS S2) that a company should consider when measuring and disclosing Scope 1, Scope 2 and Scope 3 greenhouse gas (GHG) emissions in accordance with both Standards

The press release states that the requirements in GRI 305 and IFRS S2 are highly aligned as, for example, both standards draw on the GHG Protocol. The high degree of alignment will help entities that already disclose Scope 1, 2 and 3 GHG emissions using the GRI standards to report information about GHG emissions in accordance with IFRS S2. Entities can also align other GHG emissions disclosures, depending on the choices they make in applying GRI 305 and IFRS S2.

Access the press release on the IFRS Foundation website.

 

 

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SSE releases guidance on IFRS sustainability disclosure standards

Jan 16, 2024

On January 16, 2024, the Sustainable Stock Exchanges Initiative (SSE) launched a free toolkit that has been reviewed by the International Sustainability Standards Board (ISSB) and supports stock exchanges and their market participants in the implementation of the IFRS sustainability disclosure standards.

The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals.

According to the press release, the toolkit covers the following:

  • Model guidance on sustainability-related financial disclosures
  • Transition plans training tool
  • Gap analysis checklist
  • Climate metrics training tool

The SSE has advised that additional guidance and tools will be released as required.

Access the press release  and the toolkit on the SSE website.

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IIA releases Global Internal Audit Standards

Jan 09, 2024

On January 9, 2024, the Institute of Internal Auditors (IIA) released a new set of global internal audit standards. They were designed to help internal auditors and their organizations respond better to today’s complex and rapidly changing business environment.

Among the notable changes introduced by the International Professional Practices Framework (IPPF) Evolution project are:

  • Strengthening governance frameworks to improve organizations’ responsiveness to rapidly changing business environments.
  • Specific guidance to assist internal auditors in the public sector and for small internal audit functions.
  • A more flexible framework that can adapt to the unique challenges faced by auditors in different parts of the world.
  • Specific guidance and standards on critical areas like cybersecurity.

The Standards provide internal audit principles, requirements, and considerations for implementation in a streamlined format. They help elevate the quality of internal auditing and enhance the internal audit function’s role as an essential business partner to boards and senior management.

Access the press release on the IIA’s website.

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Government of Canada Releases Guidance on Forced Labour Reporting Requirements

Jan 08, 2024

On January 8, 2024, the Government of Canada released guidance to assist companies in complying with the new Fighting Against Forced Labour and Child Labour in Supply Chains Act

The Government's new guidance will allow companies to determine more accurately:

  • whether they will be required to complete and file the report
  • what to include in the report and what information will be accepted, and
  • how to package the report and make it available to the public.

Of interest, the Government of Canada published an online questionnaire that is mandatory but may also assist in the preparation of the report itself. The questionnaire directs companies to answer specific questions about their business which reflect many of the report's legislative content requirements.

The Guidance clearly indicates that no industry can be assumed to be entirely free of forced labour or child labour risks. The Government does not want companies to certify that they or their supply chains are "risk-free" but rather are asking companies to demonstrate steps they have taken to identify and address those risks. Some industries have higher risks than others and those higher risk industries should take greater care in preparing this report because it may have knock-on impacts on enforcement efforts in the future. However, even those industries without previously demonstrated risks of forced labour in their supply chains should take this report seriously.

Access the Guidance on the Government of Canada website

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IAASB opens public consultation on amendments to meet expectations for public interest audits

Jan 08, 2024

On January 8, 2023, the International Auditing and Assurance Standards Board (IAASB) launched a consultation process on proposed narrow scope amendments to achieve greater convergence with the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (Including Independence Standards).

These proposed revisions have two key objectives. First, they would align definitions and requirements in IAASB standards with new definitions for publicly traded and public interest entities in the IESBA Code. Second, the amendments would extend the applicability of existing differential requirements for listed entities to meet heightened stakeholder expectations regarding audits of public interest entities (PIE).

Key proposed revisions include extending the scope of the entities included under the International Standards on Quality Management and the International Standards on Auditing such that they will be subject to:

  • Engagement quality reviews;
  • Providing transparency in the auditor’s report on specific aspects of the audit, including auditor independence, communicating key audit matters, and the engagement partner’s name; and
  • Communicating with those charged with governance to help them fulfill their responsibility overseeing the financial reporting process, (e.g., communicating about quality management and auditor independence).

The IAASB invites all stakeholders to provide feedback on the Exposure Draft using the digital Response Template, which is available on the IAASB website. Feedback is requested by April 8, 2024.

Access the exposure draft on the IAASB website.

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Hyperinflationary economies - updated IPTF watch list available

Dec 22, 2023

On December 22, 2023, the International Practices Task Force (IPTF) of the Center for Audit Quality (CAQ) published a document outlining its current perspectives on hyperinflationary economies under International Accounting Standard (IAS) 29, "Financial Reporting in Hyperinflationary Economies."

While IPTF monitors the status of highly inflationary countries for the purposes of applying US GAAP, its criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29.

The IPTF's discussion document for the November 9, 2023 meeting, states the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • Argentina
  • Ethiopia
  • Ghana
  • Iran
  • Lebanon
  • Sierra Leone
  • Sudan
  • Suriname
  • Turkey
  • Venezuela
  • Yemen
  • Zimbabwe

Countries with projected three-year cumulative inflation rates exceeding 100%:

  • Haiti

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

  • South Sudan

Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period:

There are no countries in this category for this period.

Countries with projected three-year cumulative inflation rates between 70% and 100% or with a significant (25% or more) increase in inflation during the current period:

  • Angola
  • Burundi
  • Egypt
  • Lao P.D.R
  • Malawi
  • Moldova
  • Nigeria (new entry)
  • Pakistan
  • Sao Tome and Principe
  • Sri Lanka
  • Ukraine

The IPTF also notes that there may be additional countries with three-year cumulative inflation rates exceeding 100% or that should be monitored which are not included in the analysis as the necessary data is not available. Examples cited are Eritrea, Syria, and Afghanistan.

Access the full list on the CAQ website.

SEC (US Securities and Exchange Commission) Image

SEC's Share Repurchase Rule Faces Uncertainty Following Fifth Circuit Decision

Dec 20, 2023

On December 20, 2023, the United States Court of Appeals for the Fifth Circuit vacated the Securities and Exchange Commission's (SEC) share repurchase disclosure rule, which mandated detailed tabular disclosure of daily repurchase data.

The decision, prompted by a legal challenge from the U.S. Chamber of Commerce, Longview Chamber of Commerce, and Texas Association of Business, deemed the SEC's actions arbitrary and capricious, citing a lack of response to comments and insufficient cost-benefit analysis. Despite a 30-day remand period, the SEC was unable to rectify the rule's defects, leading to its ultimate vacatur.

The ruling signifies the conclusion of the share repurchase disclosure rulemaking, pending potential further actions.

Access more details on the news at TheCorporateCounsel.net

FASB (US Financial Accounting Standards Board) (lt blue) Image

FASB proposes guidance on induced conversions of convertible debt instruments

Dec 20, 2023

On December 20, 2023, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) aimed at improving the application and relevance of accounting guidance related to induced conversions of convertible debt instruments.

Stakeholders provided input to the FASB that it is unclear how to apply the existing induced conversion guidance to convertible debt instruments with cash conversion and other features that have become prevalent in the market since this guidance was originally issued.

The proposed ASU would address this feedback by clarifying the requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features, should be accounted for as induced conversions.

Public comments will be accepted through March 18, 2024.

Access the news release on the FASB website.

PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

PCAOB Staff Outline 2024 Inspection Priorities with Focus on Driving Improvements in Audit Quality

Dec 20, 2023

On December 20, 2023, the Public Company Accounting Oversight Board (PCAOB) inspectors outlined their priorities for 2024 inspections in a PCAOB staff report.

The report highlights key risks  and other considerations, that auditors should be focused on when planning and performing audit procedures. It notes that the PCAOB will continue to prioritize inspections of financial-services sector audits and, digital assets.

Among the PCAOB’s inspection enhancements in 2024 will be the creation of a PCAOB team that will evaluate culture across the largest domestic audit firms. This initiative will include interviewing firm personnel and evaluating other documentation, with the aim of using this information to enhance the PCAOB’s understanding of how audit firm cultures may be affecting audit quality.

Chair Williams has encouraged audit committees to ask questions to hold firms accountable to performing high-quality audits.

Access the spotlight report on PCAOB’s website

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